Speculation: Sens finances discussions

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JD1

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Sep 12, 2005
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Agree that HRR was introduced then. My understanding of the point raised by North Coast was that teams were moving money out of potential HRR revenue streams from 2005 until 2013. The forensic accountant report was in 2012 from memory. Therefore, I was challenging your original point that this was not possible under the majority of Melnyk's tenure as he purchased in 2003 and the CBA introducing HRR was signed in 2005. It seems as though it was happening for approximately 50% of Melnyk's time as owner.

I'll go back and take a look for that report and see what it says. I have read the Levitt report which was an input to the 04 lockout.
 

West Coast Eagles

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I'll go back and take a look for that report and see what it says. I have read the Levitt report which was an input to the 04 lockout.
Think there have been two done since 2005. One by Bob Lindquist in 2008 and one by someone else around 2011/12.
 
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JD1

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So you're ignoring the part of my post where I pointed out that the previous NHLPA auditor accused the NHL of doing exactly that and the NHLPA turning a blind eye to it for strategic reasons? Ok then.

actually I hadn't got as far as the 3rd paragraph where you wrote it by the time I hit reply and posted...so no I didn't ignore it, I just hadn't read it it.

again as I said to west coast eagle I'll go read that report. flip me a link if you have one
 

coladin

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Sep 18, 2009
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Finances are in shambles. He is bleeding money at the worst time possible. I agree with Calvin as well, his first post more than his second. One thing to keep in mind, as I have two corporations that are sort of linked, but clearly different corporate numbers, is when i move money from one Corp to another, there are unavoidable tax implications, which is why you would stay away from it.

I don't think this market can be successful without higher revenues. The team needs to produce more to properly fund the entire operation properly. The shoestring mentality is tiresome for fans and , frankly, embarrassing.

I am convinced that his 30M line of credit was specifically to cover shortfalls this season. Let's hope he has planned properly to deal with what has to be done.
 
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Micklebot

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what bends me out of shape is that what you suggest is legal and may indeed happen but the real numbers wouldn't move the needle. it just largely wouldn't matter. we are not operating a 65m payroll in a world where we could be operating a 75m payroll if only Eugene didn't move money around.

Probably not, though I don't think that was ever the implication. The whole debated stemmed from from claimed losses by the team vs overall profitability of two co-dependant entities owned by the same person. I suspect Melnyk loses more money by not having an anchor tenant in his arena than he does having one. That might still result in an overall loss, or perhaps a small profit, idk, although this season might flip the script if rumours about the number of comped tickets and inflated attendance figures aren't exageratted. My contention is with those who claim that the two entities should be treated as completely independent of one another. I don't think that's very honest given the reality of the sports business.
 

NorthCoast

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May 1, 2017
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what you've post is true but the problem with this is that it largely hasn't existed in the Melnyk era. Melnyk bought the team in 2003. the lockout was 04. The cap and HRR was upon us in 05

This is from just before the last CBA: http://rosen-associates.com/documents/a-gm-accountant.pdf

How much does it still happen? Who knows but I would bet money that at least one or two owners in the league have put pressure on their accounts to get creative with the books.

Are we talking 10 mil, 1mil, or 10k...no idea, but it underscores that these businesses are pretty closely linked.

The other point I would make is that the customer also sees them as linked in some respect. You may keep the books separate, but if customers to some degree expect that supporting one business may help the other business, then that is still a reality both businesses have to live in. How they respond to it is up to them.
 
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harrisb

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Oct 6, 2009
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Great discussion on how the businesses are linked and one really couldn’t exist profitably without the other.

With that said I still think this boils down to debt. As this team has always had a large debt burden I’d imagine someone could walk backwards from the debt values and come up close to 95m just to cover debt payments.

I stand by my belief that Eugene used little if any of his own capital in the original purchase, thus piling debt on the team and has continually refinanced rather than wipe it out. Due to massive financial changes since purchase he’s now unable to cover the debt himself so it’s a constant refinance while it circles the drain.

Remove the debt and neither entity would need worry about profitability
 

NorthCoast

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I'll go back and take a look for that report and see what it says. I have read the Levitt report which was an input to the 04 lockout.
Here's another good read:

Business Structure, 'Profitability' And The NHL

Most of the abuse seems to have been from before the last CBA. That being said, most of the sens financial loses come from the same period.

Now they seem to not be losing as much, or reporting more revenue...



I don't really think that this is much of an issue because he seems willing to go forward with or without owning the stadium...so any I agree it is a pretty small factor at this point.
 

BankStreetParade

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Jan 22, 2013
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Great discussion on how the businesses are linked and one really couldn’t exist profitably without the other.

With that said I still think this boils down to debt. As this team has always had a large debt burden I’d imagine someone could walk backwards from the debt values and come up close to 95m just to cover debt payments.

I stand by my belief that Eugene used little if any of his own capital in the original purchase, thus piling debt on the team and has continually refinanced rather than wipe it out. Due to massive financial changes since purchase he’s now unable to cover the debt himself so it’s a constant refinance while it circles the drain.

Remove the debt and neither entity would need worry about profitability

He's probably tied the debt to the value of the team. Ottawa as a market doesn't need to be successful or profitable for the value of the team to increase every year.
 

JD1

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Sep 12, 2005
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Here's another good read:

Business Structure, 'Profitability' And The NHL

Most of the abuse seems to have been from before the last CBA. That being said, most of the sens financial loses come from the same period.

Now they seem to not be losing as much, or reporting more revenue...



I don't really think that this is much of an issue because he seems willing to go forward with or without owning the stadium...so any I agree it is a pretty small factor at this point.

ya I've seen that one before. definitely you can have an arena operating company. Bettman said recently that we don't need to own buildings per e but we do need operating deals on arenas. I'm pretty sure I read recently that the arena in Miami is the most booked facility in North America. that's not our situation. surely melnyk is making money on non hockey events but we don't have the same level of non hockey events as other facilities.

it's a complicated web. it's always been complicated and debt is surely a problem.
 

Tnuoc Alucard

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Sep 23, 2015
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Truly shocking that you would avoid the questions and try to deflect with your "source" routine.

You are nothing if not consistent.


I asked you for your source, and you answered with a list of questions.




First you post
They are also free to point out that simply by manipulating the rent he charges the Sens to use his CTC he can create a wide range of “profit” or “loss” statements for the Sens.
.



Then I post


Then you answer
A few questions for you Count to help you understand the situation.

1) When Melnyk offers to play in Lebreton “rent free” does he hope to help his bottom line for his Sens business?

2) When the Melnyk owned CTC negotiates with the Melnyk owned Sens does CTC Melnyk offer to have the Sens play “rent free” in order to make the Sens more profitable?

3) Who is monitoring how much rent is charged by the CTC to the Sens?

4) Would a different business model where the Sens played rent free at the CTC and made a profit justify spending more on hockey operations and player budget?

5) Or would Melnyk then cite the losses on CTC as a reason to run at the cap floor with a bare bones operation?

Please respond...I’d really like to know.




So was that you deflecting?
 
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coladin

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Sep 18, 2009
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Great discussion on how the businesses are linked and one really couldn’t exist profitably without the other.

With that said I still think this boils down to debt. As this team has always had a large debt burden I’d imagine someone could walk backwards from the debt values and come up close to 95m just to cover debt payments.

I stand by my belief that Eugene used little if any of his own capital in the original purchase, thus piling debt on the team and has continually refinanced rather than wipe it out. Due to massive financial changes since purchase he’s now unable to cover the debt himself so it’s a constant refinance while it circles the drain.

Remove the debt and neither entity would need worry about profitability

If the debt is manageable, then it shouldn't be an issue. I don't see a situation where his debt is causing him to miss payments and whatnot. Is he at 235M or 135M? I understand it is 135M plus a 100M line of credit from the NHL, which I would guess he is paying interests, or possibly it is deducted from revenue sharing, who knows. If it is 135M, that really isn't much on the value of the franchise. 235M may be a little different ballgame.

All that being said, it is a situation of being cash poor and asset rich, which is terrible for fans. He is just going to continue to borrow to cover, which so long as the franchise value increases, it will be easy to do. Just like borrowing for the contracts for the UFAs come summer time when they come into effect, or in the fall I guess.
 

Sensung

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Oct 3, 2017
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I asked you for your source, and you answered with a list of questions.




First you post




Then I post



Then you answer





So was that you deflecting?
The source, as Micklebot has already kindly pointed out, it logic and basic Math.

Now feel free to answer the questions.
 

Tnuoc Alucard

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Sep 23, 2015
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iu
 

aragorn

Do The Right Thing
Aug 8, 2004
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We have to wonder whether this owner has the financial clout to continue to own an NHL franchise in this environment of ever increasing salaries & cap. At some point enough will have to be enough & he will need to sell to owners with much deeper pockets regardless if the fans ever do come back. If nothing else does I would guess that the cap could force him to sell as it approaches $80 mil & beyond in future. It doesn't seem sustainable especially in a small market.
 

BankStreetParade

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Jan 22, 2013
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We have to wonder whether this owner has the financial clout to continue to own an NHL franchise in this environment of ever increasing salaries & cap. At some point enough will have to be enough & he will need to sell to owners with much deeper pockets regardless if the fans ever do come back. If nothing else does I would guess that the cap could force him to sell as it approaches $80 mil & beyond in future. It doesn't seem sustainable especially in a small market.

How exactly would the next owner make it work under those circumstances?
 

aragorn

Do The Right Thing
Aug 8, 2004
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How exactly would the next owner make it work under those circumstances?
I don't know. But a new owner would bring some fans back & of course winning would bring more fans back but even if they were to sell out most games the cost of salaries & operating costs could take most if not all of the revenue. Maybe an owner who could use the team as a tax write off?

I'm not sure regardless of who owns the team how much this market can afford for ticket prices. But it seems like the NHL is trending towards pricing itself out of this market. Of course, there could always be those who could come up with creative ways to keep costs at a minimum but if salaries continue to climb as they have since the inception of the cap at some point it prices could become out of reach for most fans. Can Ottawa afford a $100 mil cap for example? I don't know.
 

Tuna99

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Sep 26, 2009
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We have to wonder whether this owner has the financial clout to continue to own an NHL franchise in this environment of ever increasing salaries & cap. At some point enough will have to be enough & he will need to sell to owners with much deeper pockets regardless if the fans ever do come back. If nothing else does I would guess that the cap could force him to sell as it approaches $80 mil & beyond in future. It doesn't seem sustainable especially in a small market.

This is exactly what people were saying when Bryden sold to Poo-Jeans and her we are 15 years later saying the exact same thing.

The NHL is a Billionaires club, at some point Melnyck can’t afford the club fees, maybe this year or maybe next, but it’ll never get cheaper and his revenues won’t increase bless he gets to Lebreton but that is 5 years
 

Sensung

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Oct 3, 2017
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How exactly would the next owner make it work under those circumstances?
The league needs increased revenue sharing.

And the fundamental league number are much better than released for public consumption.

We have just seen two groups plop down 2 B to join the group (and build/refurbish buildings) and the Sens have suitors in spite of the dire picture you paint.
 
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edguy

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Feb 5, 2014
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My 1st thought was ou 5 year run- how ambitious... We should be planning on building a perennial contender like the Pittsburgh's and Chicago's of the world
 
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